Rudd puts insurance industry on notice over bushfire claims

The Prime Minister has put the insurance industry on notice and has said the Government will intervene if there are unnecessary delays in processing claims. But survivors and their insurers say there are other bureaucratic obstacles complicating what is expected to be one of the biggest insurance payouts in Australian history.

Transcript

KERRY O'BRIEN, REPORTER: The Victorian Government has today announced its wide-ranging terms of reference for the Royal Commission into the fires. But it's already under some pressure to expedite proceedings. As it stands, even an interim report with early recommendations won't be handed down for six months. But the insurance industry - on notice from the Prime Minister that he'll intervene if there are unnecessary delays in processing claims - says a six-month wait for the interim commission findings related to rebuilding would pose a considerable headache. Insurance companies are already struggling to put a dollar value on property destroyed in the fires, and there's already talk of bureaucratic delays complicating what's expected to be one of the biggest insurance payouts in Australian history. Greg Hoy reports.

KARL SULLIVAN, INSURANCE COUNCIL OF AUSTRALIA: There are still issues to overcome before we can start to get our hands around the total loss of this event.

GREG HOY, REPORTER: There's a dreadful sense of deja vu with bushfires. As they've done so often in the past, Victorians must soon begin to bury their dead in the knowledge that the fires will inevitably return - some fear, with ever-greater frequency and ferocity.

GARY MORGAN, BUSHFIRE CO-OPERATIVE RESEARCH CENTRE: Around the globe, south eastern Australia's one of the three big hot spots as far as fire risk is concerned. And so it's that cycle which actually presents us with a - quite a complex issue of land management, particularly given climate change and where that's heading, and also the community issues when we've got people living within and amongst the trees, which are going to burn. They've burnt now, and they will burn again in the future.

GREG HOY: It's the beauty and the beast of the bush. The allure of the Victorian eucalypt forests can make it easy to forget the extreme danger in periods of prolonged drought - such has been seen in recent years.

LIAM FOGERTY, VICTORIAN DEPT. SUSTAINABILITY & ENVIRONMENT: In some ways, we're blessed with some of the best wet forests in Australia. Climate change will make our droughts stronger and longer, and the frequency of extreme fire dangers will increase.

GREG HOY: Regardless, comparative affordability of land and homes in such areas is attracting increasing numbers of refugees from the city seeking the idyllic tree change. But in doing so, many risk ignoring the lessons of history. Victoria has the highest rate of home owners with no insurance, with estimates of up to 25 per cent of all home owners.

And amongst your friends on the mountain, were most insured or not?

VOX POP: We know a few people that haven't been insured, no. So, yeah: not everybody's insured, no.

GREG HOY: And why not? What's your understanding of the factors that would stop people seeking insurance?

VOX POP: I don't know. I think maybe some people maybe just can't make ends meet, can't afford it.

GREG HOY: By coincidence, Victoria, it appears, has the highest rate of tax on premiums for home insurance. Its tax is higher than for cigarettes or gambling. This helps to fund the budget for the bushfire warriors, the Country Fire Authority. But there are those who worry it is artificially inflating insurance premiums and acting as a disincentive for people to take out proper insurance.

ANTHONY DURAKOVIC, EXECUTIVE GENERAL MANAGER, AAMI: Around about 40 cents in every dollar that's raised in premiums is actually taxed - is a tax payable to the Government for the provision of fire services around Victoria. And that certainly is a disincentive for a large group of people not to insure, because it does add to the actual cost. We have spoken to the Government on a number of occasions about finding a more equitable way to ensure that all people are covered.

LIAM SHEAHAN: Those people who weren't insured are not contributing to the fire service, because part of the insurance is a fire levy, which funds the CFA, which is probably one of the finest firefighting organisations in the world. But, you know, if you've got someone who is not insured, they're not contributing, but yet they still expect someone in a big red truck and a yellow suit to come down the road and save their backside.

GREG HOY: The difficulty is it will inevitably be those without insurance who are under-insured that will be most eligible for assistance from government and charity. But could such charity also act as another disincentive for those living in bushfire zones to take out full insurance? It's just another nettle that the Victorian Government's Royal Commission may have to grasp, and one of many. Even pricklier, the insurance industry's concern, shared by others, as to exactly how devastated areas should be rebuilt or even if some such areas most at risk should be rebuilt at all.

Do you believe there are some areas that should not be repopulated?

KARL SULLIVAN, INSURANCE COUNCIL OF AUSTRALIA: We don't have a finite view on that at the moment. But we are looking at it in preparation for talking to the rebuilding authority and the Royal Commission. We are but one voice in that discussion and that discussion needs to happen fairly quickly in Victoria so that then we can start about doing proper rebuilding authorisations in a manner that is safe and consistent for the community.

RESIDENT ('After the Firestorm', Feb. 13): It might be a better idea to think outside the box and maybe think of other alternatives other than rebuilding towns that are in such danger.

JOHN BRUMBY, VICTORIAN PREMIER: If there are houses to be rebuilt in these areas, then, ideally you would be rebuilding them at a higher fire safety standard than had been the case in the past.

GREG HOY: Meantime, the Prime Minister's been talking tough to the insurance industry to expedite the refund and reconstruction process.

KEVIN RUDD, PRIME MINISTER: If any person has problems with insurance companies, people who have been affected by this extraordinary disaster, I would like them to contact their local Member of Parliament, and I would like their local Member of Parliament to contact directly the Assistant Treasurer, so we can deal with these problems.

GREG HOY: But such comments have ruffled feathers in the field and in metropolitan call centres that have been busily trying to cope with inquiries from victims.

ANTHONY DURAKOVIC: I was a bit disappointed with that because, from AAMI's perspective, from the first moment that we received one of our customer's phone calls for help, we've put into gear all of our processes. We've got people in dedicated teams just handling the bushfire victims. They've been there for 24 hours a day handling those requests, providing with funds, helping them with emergency accommodation. We've put people out here at the coalface so they can deal with them face to face.

VOX POP: The only problem is now is they're ringing me all the time wanting to get assessors up on to the property. But, at this stage, nobody can get up the mountain except for residents; you've gotta wear an arm band, you've gotta have, you know, some sort of ID and you gotta wear a wristband. So, um, this is the trouble at the moment - we just can't get them up there.

GREG HOY: Sadly, it's sure to be a long, slow process, with the Royal Commission's so-called early findings not expected until August 17th. But there is one thing for certain: between fire and flood, don't expect any discounts soon on insurance premiums, particularly if you're one of those that who to live amongst the splendour of Victoria's forests.

ANTHONY DURAKOVIC: There's no doubt that the number of events that we've had, plus the economic environment that that's - that has, you know, that has happened around the world and the impost that that's made on capital, there'll about an impost on insurers for reinsurance costs which'll, you know, naturally flow on into costs of insurance policies.